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 Subprime Mortgage Crisis? Hey – It’s About People!

By Shlomo Maital     


  On the day devoted to recalling victims of the Holocaust, in Israel, there is a moving ceremony in which the endless list of names of those who perished is read.

   I wonder if we could organize a Wall St. Victims day, in which the names of all those who lost their homes are read.  How many are there?

    “Already some 5 million homes have been lost to foreclosure; estimates of future foreclosures range widely. [Moody’s Analytics chief economist Mark Zandi], who has followed the mortgage mess since the housing market began to crack in 2006, figures foreclosures will strike another three million homes in the next three or four years”. 

  That makes 8 million homes lost by families.  Far more than in the Great Depression.   And each lost home is a tragedy for a mother, father, children.   Assuming 3 persons per household:  24 million people have lost their homes or will in the next few years, as they struggle to pay for mortgages whose value far exceeds the value of their homes.

     Journalist Peter Eavis has done us a great service by tracking one single mortgage, with a family name, through the Wall St. machine that turned it into a toxic poison pill.   (New York Times, Aug. 14, 2013, “A toxic bond that keeps causing pain”).  Here’s how it goes. 

   The bond is GSAMP Trust 2007-NC1.  GS is Goldman Sachs, who packaged the bond.  NC is New Century, a mortgage lender which lent Wendy Fillmore and her husband $274,000 (in 2 mortgages), to buy a $276,000 house in Las Vegas. (Yes, 100% mortgage).  “I was wondering how we managed to get approved,”  Wendy told Eavis.  NC didn’t care if Wendy and her husband paid their mortgage or not; because NC sold it right away to “GS”.  GS packaged the Fillmore mortgage and others, as collateral for a mortgage-backed security,  GSAMP Trust 2007-NC1, that got AAA credit rating so pension funds could buy it.  GS didn’t seem to care much, either, if the mortgages backing the bond were any good.  Those pension funds relied on their trust in Wall St. and in Goldman Sachs, which created the bond in Feb. 2007, when the housing market already had begun to look shaky.  They didn’t, and couldn’t, check on every mortgage that backed  GSAMP Trust 2007-NC1. The bond-rating agency didn’t, and couldn’t, check every mortgage either. That was the beauty of the whole game.  The toxic poison was hidden.  But it was there, for sure.

    Three-fourths of the mortgage payers, whose mortgages back the GS bond, have fallen way behind in their payments, according to the Boston Federal Reserve Bank.   Wendy still pays, but struggles, and is desperate, because the value of her house today is half the value of what she owes in the mortgage.  And of course she can’t sell the house either,  Las Vegas’ housing market is terrible.  Why would you struggle to pay a $276,000 debt for 25 years only to own an asset worth half that?  Well, Wendy wants to continue to live in the house.  But others have simply walked away. 

    What about the GS people who created the toxic bond?  Former GS senior manager Jonathan Sobel left GS in 2008. He is a defendant in a federal suit.  He recently bought a duplex on Park Ave., NY,  for $19 m.  

   According to the New York Times, former GS head of mortgages Daniel Sparks wrote in an email, a month before Wendy got her mortgage, that he was a ‘bit scared’ of New Century.  That email will doubtless haunt him, and has been used in a Congressional investigation.  He didn’t tell the pension funds that.  He should have. 

     p.s. the monthly payment on a 30-year $274,000 mortgage, at 5.25% interest,  is $1,524, or $18,000 a year.  By the time Wendy and her husband finish paying their mortgage, in about 24 years, they will have paid (in principal and interest)  $548,669.60.  


 GS subprime   923 of the 1604 mortgages backing a high-yield 2006 GS bond were 

                                                                                                    “highly risky”.  Guess what its credit rating was? 


When the pill is the problem, not the solution

By Shlomo Maital      


  I’m afraid this blog very often sins, by becoming ‘preachy’.   Even if blogs are meant to convey strong opinions, they can be tiresome if they incessantly preach.

  This blog is about the criminal overuse of anti-depressant drugs, fueled by the greed of Big Pharma, with some doctors complicit as well.

   Here are the data. Judge for yourselves.  (source: Global New York Times, Aug. 14: “Medication blues”, by Roni Caryn Rabin). 

  *  1 in 10 Americans now takes an antidepressant medication.  Among women in their 40s and 50s, it is one in 4.

* 2/3 of more than 5,000 patients diagnosed as depressive in the previous 12 months DID NOT MEET THE CRITERIA FOR MAJOR DEPRESSIVE EPISODE, according to the DSM, Diagnostic & Statistical Manual of Mental Disorders. Published in Psychotherapy and Psychosomatics. 

* 6 of 7 elderly patients 65 and older diagnosed as depressive did not meet the criteria for depression.

  * Most people stay on anti-depressants for at least two years; some take them for a decade or more.  These drugs have side-effects. Some are serious. 

* A NYC woman was prescribed an anti-depressant a few weeks after her husband died, even though she thought feelings of grief and sadness were appropriate.

     Once, we knew that life had ups and downs.  When you’re experiencing the downs, you fight through them.   The drug culture that says, “pop a pill for every possible symptom of occasion” has led to a different drug culture, one that consumes a variety of drugs, mostly illegal, to make us feel good.      

   Recently a well-known Israeli doctor, speaking on TV, admitted that he had given testimony about certain drugs before a Knesset committee – but he admitted, he forgot to mention that he had received large grants from the drug company. 

   Can we trust our doctors, who get trips, junkets, research grants and other perks from drug companies?  Can we trust the drug companies, struggling to maintain obscene profit margins with a dwindling pipeline of over-costly drugs?  Are we over-medicated?  

     What is most angering is that American soldiers, struggling with post-traumatic stress disorder, and there are thousands of them, appear to get minimal care, if any.  Why are some people popping pills for imaginary disorders, while others are not getting the treatment they need? 


Blog entries written by Prof. Shlomo Maital

Shlomo Maital
August 2013
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